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Economic outlook for 2013 − 2015

Economic outlook for 2013 − 2015. Euro & talous (Bank of Finland Bulletin) 5/2013. Positive signals from the international economy. Share indices up, but big differences between countries . Narrowing of government bond yield spreads reflects improved expectations. 27391.

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Economic outlook for 2013 − 2015

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  1. Economic outlook for 2013−2015 Governor Erkki Liikanen Euro & talous (Bank of Finland Bulletin) 5/2013

  2. Positive signals from the international economy Governor Erkki Liikanen

  3. Share indices up, butbig differences between countries Governor Erkki Liikanen

  4. Narrowing of government bond yield spreads reflects improved expectations 27391 Governor Erkki Liikanen

  5. Measures by stressed countries have boosted competitiveness and improved balance in the economy 26295@Chart23(e) Governor Erkki Liikanen

  6. The signals from the international economy are encouraging, but the financial crisis casts a long shadow Governor Erkki Liikanen

  7. Finland’s growth outlook slowly improving Governor Erkki Liikanen

  8. GDP stabilised during 2013 25525 Governor Erkki Liikanen

  9. Finnish economy begins slow growth 24078 Governor Erkki Liikanen

  10. Supply and demand *At current prices, EUR bn. Governor Erkki Liikanen

  11. Labour market conditions will not improve until 2015 Governor Erkki Liikanen

  12. Employment will improve as output growth strengthens 26516 Governor Erkki Liikanen

  13. Productivity to grow sluggishly… 24079 Governor Erkki Liikanen

  14. …but unit labour costs will growsubstantially slower 20749 Governor Erkki Liikanen

  15. Deterioration of cost-competitivenesswill halt Governor Erkki Liikanen

  16. Recovery in exports boosts domestic demand Governor Erkki Liikanen

  17. A pick up in international trade spurs Finnish exports 21242 Governor Erkki Liikanen

  18. Investment activity remains muted 23231 Governor Erkki Liikanen

  19. Weak earnings development weighs down consumption 19912 Governor Erkki Liikanen

  20. Current account in balance 26152 Governor Erkki Liikanen

  21. Inflation slows Governor Erkki Liikanen

  22. Inflation has slowed down despite tax increases 20984 Governor Erkki Liikanen

  23. Weak demand keeps price pressuresin check 25534 Governor Erkki Liikanen

  24. Subdued growth erodes public finances Governor Erkki Liikanen

  25. Central and local government deficit remains sizable… 24903 Governor Erkki Liikanen

  26. …also general government in substantial deficit 24903 Governor Erkki Liikanen

  27. Public debt to exceed 60% already in 2014 24903 Governor Erkki Liikanen

  28. Consolidation of public finances progressing – difficult decisions still ahead Governor Erkki Liikanen

  29. Local government consolidation clearly slows down growth in public debt • General government has accumulated an excessive structural deficit. • The debt ratio will not be brought down to 60% without additional measures. • Local government consolidation measures decided in the government’s structural program • will balance the municipal finances and bring the general government structural deficit close to the target level. • will reduce the risk of over-indebtedness, but the debt ratio will remain above 60%. Governor Erkki Liikanen

  30. Longer working careers and public sector productivity play a key role in the 2020s Governor Erkki Liikanen

  31. Fiscal policy steering needs strengthening • The framework of central government spending limits needs to be reformed. • If the slowdown of economic growth is structural, spending limits ought to be adjusted accordingly. • The project to reform the system of financial steering for local government sector is important. Governor Erkki Liikanen

  32. Structural reforms essential to close the fiscal sustainability gap • If all the planned structural policy measures will be applied in practice, they would be sufficient to close the sustainability gap. • Determined progress is necessary to achieve the objectives of the government’s structural policy programme. • Pension reform is essential. • Finland’s ability to make decisions is crucially important. Governor Erkki Liikanen

  33. Financial stability Governor Erkki Liikanen

  34. Banking union going forward • Comprehensive assessment of banks before the European Central Bank assumes responsibility for supervisory tasks • Ensuring viability of banks before single supervision • Banks to be recapitalised, if required by results of comprehensive assessment Governor Erkki Liikanen

  35. Single resolution mechanism is the key • Orderly winding-down of unviable banks requires a resolution mechanism • Resolution mechanism is based on principle of bail-in • Implementation of bail-in a prerequisite for effective resolution Governor Erkki Liikanen

  36. Macroprudential tools to be introduced in Finland • The need for national macroprudential tools is more compelling within monetary union • special challenge: country-specific housing market risks • Systemic risks have to be addressed by several tools: • countercyclical capital buffer (excessive lending growth) • loan-to-value limit (housing market risks) • capital buffer for systemically important banks and systemic risk buffer (concentrated banking sector) Governor Erkki Liikanen

  37. Domestic banking sector Governor Erkki Liikanen

  38. Banking system’s risk-bearing capacity has remained good Governor Erkki Liikanen

  39. Profitability of deposit banking under strain Governor Erkki Liikanen

  40. Household indebtedness levelling off Governor Erkki Liikanen

  41. Imputed margins on new corporate loans granted by banks have widened Imputed average margins on new corporate loans in Finland Finnish non-financial corporations’ interest-bearing debt Governor Erkki Liikanen

  42. No significant changes in access to finance for SMEs, but company-specific risk assessments tighter New corporate loan agreements of up to EUR 1 million in Finland Access to bank finance of Finnish SMEs Governor Erkki Liikanen

  43. Euro & talous (Bank of Finland bulletin) 5/2013Feature articles: • Rahoitusjärjestelmän vakaus (Financial stability in Finland) • Talouden rakenneuudistukset ja julkisen talouden kestävyys (Structuralreforms and sustainability of publicfinances) Helvi Kinnunen, Petri Mäki-Fränti and Jukka Railavo Governor Erkki Liikanen

  44. Thank you! Governor Erkki Liikanen

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